The objective of this project was the identification of ‘connected clients’ as clients so closely linked by idiosyncratic risk factors that it is prudent to treat them as a Single Risk. The concept of a ‘Single Risk’ is a key underpinning of the Large Exposures framework. Counterparties (or clients) must be grouped and considered a ‘Single Risk’ for large exposure purposes if they are ‘interconnected’ by a control relationship or by some form of economic dependency. For this purpose, Avantage Reply assessed the current process and proposed a new system for new and existing clients.
The client needed help developing a new process to identify and group connected clients among the existing clients and for every new client starting to do business with the institution.
The main challenge faced during this project was to generate rules and implement the requirements which allow the client to reliably identify a “group of clients linked by a control relationship and/or economic dependence” as it is phrased in the regulation.
To fulfill the client’s needs, Avantage Reply provided consultants which first assessed the existing processes and structures related to the groups of connected clients. In the following step, a new process/system was developed. For that purpose, the consultants identified relevant IT systems and proposed targets and governance structures for new clients as well as the reviews of existing ones.The last step was the coordination with the business and operations management for the set-up of the solution.